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It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market

Eizo Akiyama, Nobuyuki Hanaki () and Ryuichiro Ishikawa
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Eizo Akiyama: Faculty of Engineering, Information and Systems, University of Tsukuba - University of Tsukuba
Ryuichiro Ishikawa: Faculty of Engineering, Information and Systems, University of Tsukuba - University of Tsukuba

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Abstract: To what extent is the observed mispricing in experimental asset markets caused by strategic uncertainty and by confusion? We address this question by comparing subjects' initial price forecasts in two market environments: one with six human traders, and the other with one human and five computer traders. We find that both strategic uncertainty and confusion contribute equally to the median initial forecast deviation from the fundamental value. The effect of strategic uncertainty is greater for subjects with a perfect score in the Cognitive Reflection Test, and it is not significant for those with low scores.

Keywords: Experiment; Strategic uncertainty; Bounded rationality; Asset markets; Computer traders; Cognitive Reflection Test (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-upt
Date: 2017-10-24
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01294917
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Published in Economic Journal, Wiley, 2017, 127, pp.F563-F580. 〈10.1111/ecoj.12338〉

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Related works:
Journal Article: It is Not Just Confusion! Strategic Uncertainty in An Experimental Asset Market (2017) Downloads
Working Paper: It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market (2013) Downloads
Working Paper: It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01294917

DOI: 10.1111/ecoj.12338

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